Benefits for Disabled Adults Living With Parents: Financial Support Options

Caring for a disabled adult child can be both emotionally and financially challenging. Many families struggle to cover medical expenses, daily care, and long-term financial planning while ensuring their loved one has the best quality of life possible. Fortunately, various forms of financial support can help ease this burden.

Government-Based Financial Assistance

Several government programs provide aid to disabled adults living with their parents, helping with living expenses, healthcare, and support services. Supplemental Security Income (SSI) offers monthly payments to individuals with disabilities who have limited income and resources. In 2024, the federal SSI payment is $943 per month for an individual, with some states offering additional funds. Eligibility is based on financial need. If the disabled adult is under 18, parental income is considered, but after turning 18, only their own income and assets are evaluated.

Medicaid provides healthcare coverage for low-income individuals, including those receiving SSI. Many states offer Home and Community-Based Services (HCBS) waivers, covering in-home care, personal assistance, and other services that help disabled adults remain at home rather than in institutional care. These waivers often have long waitlists, so applying early is recommended.

For those who have worked and paid into Social Security, Social Security Disability Insurance (SSDI) may be an option. Additionally, disabled adult children of retired, disabled, or deceased parents may qualify for benefits under the Social Security Disabled Adult Child (DAC) program. This allows them to receive benefits based on their parent’s work record, provided their disability began before age 22.

Tax Deductions and Credits

Families supporting a disabled adult at home may qualify for tax deductions and credits. The IRS allows parents to claim a disabled adult child as a dependent if they provide more than half of their financial support and the child’s gross income falls below the exemption threshold, which is adjusted annually.

The Child and Dependent Care Credit helps offset caregiving costs for parents who work. This credit covers a percentage of qualifying expenses, up to $3,000 for one dependent or $6,000 for two or more. Unlike a deduction, which reduces taxable income, this credit directly lowers the amount of tax owed.

Medical expenses can be deducted if they exceed 7.5% of adjusted gross income (AGI). Eligible expenses include doctor visits, therapy, specialized equipment, and home modifications for accessibility. Keeping detailed records of these costs is essential for tax purposes.

Insurance Policies and Estate Arrangements

Planning for a disabled adult child’s long-term financial security requires careful use of insurance and estate planning tools. Life insurance can help fund a special needs trust (SNT), ensuring financial support without affecting eligibility for need-based assistance programs. Permanent life insurance policies, such as whole or universal life, provide lifelong coverage and accumulate cash value, making them a common choice for this purpose. Term life insurance is more affordable but only lasts for a set period, making it less useful for long-term planning.

A special needs trust (SNT) protects assets while maintaining eligibility for government benefits. Funds in an SNT are not counted as personal assets of the disabled individual, preventing disqualification from Medicaid or SSI. There are two main types: first-party trusts, which hold assets belonging to the disabled person, and third-party trusts, funded by parents or other relatives. Third-party trusts are particularly beneficial because they are not subject to Medicaid payback rules, meaning any remaining funds after the beneficiary’s passing can be distributed to other heirs.

Estate planning should also address guardianship and decision-making authority. If the disabled adult cannot manage their own financial or personal affairs, parents may need to establish a durable power of attorney or seek legal guardianship. A durable power of attorney allows a designated individual to make financial decisions, while guardianship grants broader authority over financial and personal matters. The right approach depends on the individual’s level of independence and ability to make informed decisions.